T.I.P. Wealth Management

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Markets. Was surprised that OPEC decided not to cut production, like they have done over the past 20 years. In hindsight, perhaps he shouldn’t have been overly surprised because every 20-30 years or so they seem to do this to readjust the environment. He has definitely cut back, but at this stage this lower oil price environment will probably stabilize, but will stay low for the next 6 to 9 months. Meanwhile he will retrench to his best present ideas and best defensive names. The opportunity will come to pick away at these names over the next few months. All the geopolitical issues and risks are still here and still have the potential to get oil prices back up, but overall on oil per se, the supply/distribution needs a little while to catch up. The overall market will be uncertain for the 1st half. He thinks it will be a mirror image of last year which started strong and ended weak, and this year might be just the opposite. He is constructive on the markets overall, and especially with the collapse of oil prices, expects to see great opportunities in the spring to buy these stocks.

US banks? From a relative valuation point of view, there is no question that the US money centred banks are a lot cheaper than the Canadian ones, probably because the business mix is quite different. Canadian banks are more of a super regional bank. Coming out of 2009, there has been a lot of regulatory change in the US and they are still up in the air as to how much ROE they can earn. They are cheap, and as long as the US economy can grow, there should be decent upside from them.

This has performed very well over the last few years. Has a long-term track record and they continue to grow their earnings, both organically and by acquisition. The acquisition of The Pantry that will be closing soon, is not the best operation out there, so there should be a lot of room for the company to squeeze out more cost benefits. While the stock is not cheap, it should be a core name in your portfolio.

This is on a nice comeback trail. The stock has come up since John Chen took over about a year ago. He has done a lot of right things, including cutting costs to get to cash flow breakeven and narrowed the focus of the company to enterprise business users as well as software. A lot of things are taking shape, so he really likes the prospects however, the current stock price cannot be justified based on the short-term earnings. It has a lot of challenges because of the very small market share as well as continuing to lose service revenue which is high margin. You have to make a bit of a bet on this, but he thinks John Chen will be successful. It won’t be quick and easy.

The mutual fund industry is a slower growing business than it was back in the 90s. Now it is more growth by market appreciation and slower accumulation. In this space, this company is the best operator in the Canadian market. They run a very lean business and keep their costs low. Have a great sales force and a lot of recognition. Tends to trade at a bit of a premium to the whole space. A good name to own for the long-term.

One of the better names as far as running a sustainable dividend strategy. Even at current oil prices, they don’t have to cut dividends. Longer-term he believes that oil prices will return to a higher level of $80+. This is one that he would hold on to, and perhaps gradually add to over the next several months. With a company that is focused on a sustainable dividend, acquisition driven with a good balance sheet, this is a time for buying things.

Gold stocks have had a couple of good days of runs. This one has operations that are making some free cash flow, and any sort of run in gold prices drops to their bottom line. Long-term he is bullish on gold prices, but in the near term he can’t see it going anywhere beyond $1250, but not below $1100 either. If you are inclined to trade, this is a good one to own.

(A Top Pick Dec 2/13. Down 16.63%.) He was in this because of a good management team that came from an industry that knows how to do subprime mortgages. There was a dispute where management was let go, followed by activists actions that was bringing them back. It turns out there was a settlement, but they didn’t bring back the original management so he got out. It is cheap and they have a lot of cash, so he expects at some point it will get sold.

This is very specific to the Canadian horizontal drilling, especially on the gas side of things. If we have the financial gas announcement come in on the 1st quarter by Pertronas, it would be a boost to Canadian companies and, therefore, to the fractures as well. Very well-run company and clean balance sheet. One of the top names he would own.

They were pretty much 100% a Magna property, which brings risk, but they have a great balance sheet, about half the leverage of the average REIT. The trick here is to add acquisitions, adding property other than Magna to reduce the risk profile and increase the distribution. As long as they can continue to execute and buy more properties at the right price, you see the dividend continued to increase. Yield of 5.31%.

Execution over the past few years has been fantastic. Good management. Trades at a discount to its peers because of its smaller size and lower multiple earnings. They’ve fixed that and the stock has appreciated quite strongly. They also have the Sky Jack industrial division, which is leveraged to construction as well. He likes the name. However, the stock has caught up to the sector average now, so going forward they have to continue to grow their earnings like they have been. He likes the name.

Mostly natural gas. The upside will be coming from leverage to natural gas exports. This has been long rumoured to be a take over candidate for anybody who needs gas supply in Northeast BC, which is entirely possible. Well-managed. Has a really good asset base, but because of that it is trading at pretty high multiples. Whether you buy this or not depends on your outlook for Canadian natural gas.

Change this for a Canadian bank? For one thing, this has a higher dividend yield than the average Canadian bank, which should be taken into consideration. This is composed of 2 things. Investors Group and Great West Life. Banks have out performed the lifecos in the last little while, which is why you are seeing a performance differential. This one is relatively safe. When and if interest rates go up, the life companies will outperform Canadian banks.

The stock has fallen, but not because the company is doing anything different. The mining space has been quite volatile. Especially with the oil price falling you see a lot of volatility in the mining space. They continue to ramp up their project in Madagascar and are set to produce a lot more nickel this year, which will drastically improve their earnings profile. Also, the partial lifting of sanctions to Cuba by the US is going to help them.

(A Top Pick Dec 2/13. Down 0.80%.) Thinks they are the best coffee chain out there. The thesis is always making more money out of things like China and selling more and varied products to their customers. Things haven’t changed, but the challenge is that it is a high multiple stock, so any time the market has not done well, you are going to see this fluctuate quite a bit more. However, he does think they are going to create value and continue to justify the high multiples.

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